Market Briefing 16: Bitcoin (BTC) Taps Our $76K Target, a Bullish Leg Could Be Next
Bitcoin (BTC), Ethereum (ETH), Hyperliquid (HYPE), Derive (DRV)
Bitcoin COT: Futures unwind around expiry as ETFs shed $1bn
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For the fourth consecutive week, Leveraged Funds, the category encompassing hedge funds and CTAs, reduce their net short position. Welcome to our weekly analysis of the CFTC’s Commitments of Traders (COT) report. In this edition, as of November 3, we look at the Asset Managers’ retreat and the heavy ETF outflows.
What the report shows
The CFTC’s Traders in Financial Futures report, released on November 6, covers positions as of Tuesday, November 3, in standard CME Bitcoin-0.33% futures (5 BTC per contract). It is the first report covering positions after the October contract expired on October 30.
In our previous update, hedge funds were accelerating the reduction in their shorts while asset managers were adding to theirs. This week, both categories reduce their long and short positions. The November 3 snapshot is also the first to capture the October contract expiry.
This week, the columns leave little room for confusion: Leveraged Funds reduce both their longs (−773 contracts) and their shorts (−2,161). Their spreading, the offsetting long and short positions held by the same fund across different maturities, plunges from 1,843 to 427 contracts (−1,416).
Adding spreading back to each side shows that long positions fall by 2,189 contracts and short positions by 3,577. Gross positions decline from 19,439 to 13,673 contracts, a drop of 29.7% in one week and 33.5% since October 6.
The net short position therefore shrinks because shorts decline faster than longs within a broader scaling back of positions. Excluding spreading, the number of funds holding longs falls from 32 to 26, while the number holding shorts rises from 37 to 39. The net short position now represents just 14.8% of open interest, compared with 19.1% a week earlier.
Open interest, the total number of outstanding contracts, falls by 3,264 contracts to 17,527, equivalent to around 87,600 BTC. In Micro Bitcoin futures, with a contract size of 0.1 BTC, it drops by 26.1%, with Leveraged Funds’ spreading also collapsing. Across both contracts, hedge funds’ net short position shrinks by around 7,600 BTC.
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Expiry: a familiar pattern, a sharper contraction
The 15.7% drop in open interest is substantial. To assess whether it reflects an unusual retreat by investors, however, it needs to be compared with other expiry weeks, when positions often contract. The next question is whether those positions rebuild once expiry has passed.
CME Bitcoin futures expire each month on the last Friday. Contracts still open are then cash-settled. To maintain their exposure, funds must roll it into another maturity. Otherwise, their positions disappear from open interest without a closing trade being required.
This is the cycle we said we would examine after October 30. The table compares positions on the Tuesday before and the Tuesday after each of the last five expiries.
Spreading and changes in net positions are expressed in contracts of 5 BTC. A positive net change here indicates a reduction in the net short position.
The pattern is recurring. In four of the five cycles, open interest falls by more than 10% after expiry, spreading plunges and hedge funds’ net short position shrinks. Expiring shorts that are not rolled over can contribute to this reduction, particularly when a basis trade reaches maturity.
October shows the largest contraction of the five cycles, but the COT aggregates all maturities: it cannot distinguish contracts that were not rolled over from positions closed in other maturities.
What happened after previous expiries also warrants caution. Following the June expiry, the net short position had already rebuilt by 1,404 contracts the next week. After the August and September expiries, it remained broadly unchanged. The next report will show whether the current level holds.
Asset managers cut longs as ETFs see outflows
Last week, Asset Managers were reducing their net long position by adding shorts while retaining their longs. This week, the move comes through declining longs.
Their net long position falls from +2,754 to +2,403 contracts, a decline of 12.7% in one week and 34% since October 13. Including spreading, long positions fall by 581 contracts and shorts by 230. Gross positions decline by 10.8%.
The number of managers reporting longs excluding spreading also continues to fall: just 5 remain, compared with 11 on October 13, three weeks earlier. Over the latest week, the number holding shorts rises from 6 to 9. Dealers also reduce their net long position, from +1,256 to +479 contracts, with 547 additional shorts.
In the spot market, the period covered by the report, from Wednesday, October 28, to Tuesday, November 3, is marked by substantial outflows from US Bitcoin ETFs.
As a reminder, part of hedge funds’ short position represents the short leg of a basis trade: a fund buys spot Bitcoin, often through an ETF, and sells a futures contract trading at a premium to capture the price difference at expiry. A reduction in shorts accompanied by ETF outflows is consistent with these trades being unwound or reaching maturity.
That is this week’s configuration, and it is more pronounced than in early October. Hedge funds’ shorts fall by around 17,900 BTC, including spreading, equivalent to roughly USD 1.4 billion at a Bitcoin price near USD 78,000, alongside USD 1 billion in ETF outflows. The largest outflow day falls on October 30, the expiry date, consistent with arbitrage trades reaching maturity without being renewed.
The comparison remains indicative: the decline in shorts also includes calendar spread positions, and the data do not identify the same funds behind the ETF flows. October 30 is also the first US trading session after the Binance hack on October 29. Outflows may therefore combine arbitrage trades that were not renewed with directional selling, as Bitcoin fell by around 4% between the two snapshots.
Our view
Four weeks in, the picture is clearer once we look beyond the net short position. Since October 6, it has shrunk by 62%, but hedge funds’ gross positions have fallen by a third and their longs, including spreading, by 19%. Funds are not building long positions: they are scaling back their presence in futures.
The contraction around expiry is the largest of the five cycles examined. Combined with ETF outflows, it strengthens the case for arbitrage trades reaching maturity without being renewed, in a market also weakened by the Binance shock.
Meanwhile, asset managers’ appetite continues to erode: their net long position has fallen by a third in three weeks, and the number of managers holding longs has halved. The COT therefore points to a futures market shedding positions rather than a reversal in institutional sentiment.
Since the reporting cutoff, the November 4 rebound has failed to hold. ETFs lost another USD 430.2 million on November 5 and USD 411.9 million on November 6, when Bitcoin closed near USD 75,800.
The next report, scheduled for Monday, November 16, covering positions as of November 10, will allow us to track three developments:
- The rebuilding of shorts after expiry. Following the June expiry, the net short position had already rebuilt the next week. An increase in total shorts, accompanied by a return towards −4,000 net contracts, would signal the reopening of short positions, whether directional or arbitrage-related.
- Open interest and ETF flows. A stabilization in futures positions without an end to ETF outflows would show that pressure on spot demand persists beyond expiry.
- Asset Managers. With just 5 managers reporting long positions, the first question is whether their longs stop declining, followed by whether fresh buying takes over.
